The Reserve Bank of India (RBI) on Tuesday took Allahabad Bank, Corporation Bank and Dhanlaxmi Bank out of the prompt corrective action (PCA) framework, following an improvement in the two public-sector banks’ (PSBs) financial ratios after a fresh round of capital infusion in them.
Last Wednesday, the ministry of finance had announced an infusion of Rs 9,086 crore in Corporation Bank and Rs 6,896 crore in Allahabad Bank.
The two lenders were the largest beneficiaries in the latest round of recapitalisation which involved fresh infusion into a total of 12 PSBs.
The three banks follow Bank of India, Bank of Maharashtra and Oriental Bank of Commerce in exiting the PCA framework.
The first set of banks were removed from PCA on January 31.
In a statement on its website, the RBI said the Board for Financial Supervision (BFS), in its meeting held on Tuesday, reviewed the performance of banks under PCA and taken note of the capital infusion on February 21 into various banks. The infusion has shored up their capital funds and also increased their loan loss provision to ensure that PCA parameters were complied with.
“The two banks have also made the necessary disclosures to the stock exchange that post-infusion of capital, the capital-to-risk assets ratio (CRAR), common equity tier 1 (CET1), net non-performing asset (NPA) and leverage ratios are no longer in breach of the PCA thresholds. The banks also apprised the RBI of the structural and systemic improvements put in place to maintain these numbers,” the central bank said.
Based on the principles adopted by the BFS in its earlier meeting on January 31, it was decided in the meeting held on Tuesday that Allahabad Bank and Corporation Bank be taken out of the PCA framework, subject to certain conditions and continuous monitoring.
It has also been decided to take Dhanlaxmi Bank out of the PCA framework, subject to certain conditions and continuous monitoring, as the bank is found to be not breaching any of the risk thresholds of the PCA framework. The RBI will continuously monitor performance of these banks under various parameters,” the statement said.
The banks that continue to remain under PCA are United Bank of India, UCO Bank, Dena Bank, IDBI Bank and Central Bank of India. Dena Bank is set to be amalgamated with Bank of Baroda and Vijaya Bank by April 1.
The PCA framework envisages limited risk-taking and heightened capital conservation by weaker banks in the system and sets out specific identifiers for the same.
